Academic journal article Multinational Business Review

Minority-Owned Business Enterprises' Participation in International Trade

Academic journal article Multinational Business Review

Minority-Owned Business Enterprises' Participation in International Trade

Article excerpt

This study is an attempt to explain empirically how much minority-owned enterprises with given firmspecific and owner-specific characteristics export. Based on the 1987 Bureau of the Census survey of minority-owned enterprises data, we have reached conclusions on the differences in the volume of exports of firms with given threshold characteristics, relative to enterprises which posses more or less of those characteristics. These characteristics are firm size, start-up capital, and the number of years in business. Selected owner characteristics considered are education, age, and prior work and management experience. These characteristics were selected to allow us to examine the effect of firm size and management characteristics, which have been the focus of literature investigations.

Introduction

In spite of the obvious potential contributions of exports to the national economy and individual corporations, many business enterprises do not endeavor to take advantage of the potential gains. The literature claims that one reason for this is the lack of national and corporate policy to stimulate export incentives. The other is the attitude of corporate managers who continue to regard exporting as a marginal business, Cavusgil et al (1981). The literature maintains that unless top management is ready to stress the importance of growth and commit corporate resources into market planning, the company cannot reap the full potentials of exporting. This is partly one of the reasons why the United States exports only about 5.8% of its GDP compared to Germany with about 26%, Canada with about 25% and Japan with about 10.5%, Knowlton (1988). Tremendous opportunities exist for the United States to export a lot more because the US has the largest single market and the US GDP is about four times as large as the rest of the world, Knowlton (1988). The US Department of Commerce estimates that about 25,000 jobs are created for each $1 billion of export, therefore a policy of job creation can be considered to be synonymous with a policy of export expansion. The 1993 North American Free Trade Agreement (NAFTA) and the Uruguay Round of trade agreement, otherwise known as the General Agreement on Tariffs and Trade (GATT) were therefore intended to increase the amount and strengthen the performance of export activity of the US firms.

What is the best strategy to increase US exports? It is estimated that small-and-medium sized businesses exhibit the fastest growth rates and generate more new jobs than large firms. It is also estimated that only ten percent of US exports are generated by small businesses, while 250 large multinational corporations account for approximately 85% of US exports. A substantial improvement in the US export performance will therefore require the participation of and involvement of a considerably large number of small-and-medium sized firms. Small-andmedium sized businesses produce a wide variety of goods and services, often of exceptionally high quality and possess the greatest degree of flexibility which allow them to profitably penetrate small markets using strategies that are difficult for large companies to implement, Dobrzynski (1985), Reagan (1984). Moreover small-and-medium sized firms are able to adapt quickly to fluctuating markets and play a major role in the global market. What role should minority-owned enterprises, generally known to be small, be expected to play in the national policy to increase US exports? Although so much is known about small-and-medium sized firms generally, nothing is known about what role minority-owned firms have played in American export activity. With so much unknowns about minority-owned businesses' ability to export, what policies should government adopt in order to enhance minorities' active participation in international trade?

The purpose of this study is to examine the determinants of exports by minority-owned firms. Minority-owned enterprises are those enterprises in which people of ethnic minorities, such as Blacks, Hispanics, Asians, Native Americans, Women, and other ethnic groups have majority shares. …

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